a crash course for building employee retention

7/25/2019 A Crash Course for Building Employee Retention

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A Crash Course for Building Employee Retention 1

A CRASH COURSE

FOR BUILDING

EMPLOYEE

RETENTION

BUILDING EMPLOYEERETENTIONIN YOUR

COMPANY


2/15


There is nothing more disappointing than finding the

right talent for a position, hiring them, developing

them, grooming them, loving their work, and then

hearing the dreaded words: Im giving my notice.

In the face of a growing talent shortage, few companies can afford

to ignore strategies for employee retention. But how can we create

a magnetic and sticky culture that not only attracts candidates tous, but helps us hang on to the great talent we already have? We

need answers.

This collection of some of our most popular blog posts will offer

you some constructive advice and actionable pointers on how you

can reduce voluntary turnover and build a culture of retention.

3 // The Ridiculously High CostOf Employee Turnover

Employee retention is a bottom-line

ROI problem. Heres a look at its

financial impact on your organization.

6 // T Talt War Casfr IsOver (and What That Means

to You)A look at the current state of

employee retention and how you can

prepare for the looming talent war.

9 // Why Managers Fail ToRecognize EmployeeContributions

Leigh Branham, author of 7 Hidden

Reasons Employees Leavesharesstrategies for helping managers

to be more successful in keeping

employees happy.

12 // 12 Srfr Tips t RcEmployee Turnover

Tips for companies to help build

retention.

InTRoduCTIon The ARTICLeS


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The source of my astonishment was the

creation of an infographic for our new

paper that shows the incredible costs

of turnover. (Its called 5 Reasons You

Need Strategic Recognition). One might

think that an infographic like this would

be simple, but it turns out, as anyone

knows who has really tried to do it the

cost of turnover is not an easy number to

calculate. We spent literally hours talking

over the numbers and calculations to make

sure that the end result would reflect

reality for our customers.

THE RIDICULOUSLY HIGH COST

OF EMPLOYEE TURNOVER

By Darcy Jacobsen

Every way we sliced the numbers, even with

exceedingly conservative (i.e., ridiculously

low) per-person costs resulted in a shocking

expense associated with high turnover. The

totals dwarfed the cost of even the most

robust recognition program. Programs

that hit industry benchmarks and cost 2%

of payroll spend wouldnt hold a candle to

how much employee turnover is costing

companies. And when you consider

that those programs can boost retention

up to 31%, the business case for

recognition is astounding.

Inconceivable!

Thats one of my favorite lines from the classic

movie, The Princess Bride, and I have to admit its

been running through my mind a lot over the past

few weeks, as weve been trying to calculate the

astronomical cost of employee turnover.

Even exceedingly conservative per-personcosts resulted in a shocking expense

associated with high turnover. The totals

dwarfed the cost of even the most robust

recognition program.

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Company Size: Our customers tend to range in size from 1,000 to 350,000 employees, therefore we figured 10,00 0 employees was a reasonable number.

Breakdown: Since many companies seem to break down at a 70/20/10% level, in terms of manager/employee ratio, we thought this was a safe bet for our ACME Average Company.

Average Salaries: We had a look at the Bureau of Labor Statistics numbers and did some averaging and generalizing and arr ivedat a conservative estimate of a $30/70/150K breakdown for salaries.

Cost to Replace: Heres where it start s to get more complex. In our paper we noted that SHRM has estimated the cost to replace an employee at $3,500, which was the lowest estimate of 17organizations surveyed, but we agree with experts who suggest that the cost to replace really does vary by role. Still, the cost to r eplace even a minimum wage employee, when you factor in time lost,training time, interviewing and advertising investment, etc. is significant. It goes up exponentially when an exhaustive talent search is needed. In the end the estimate we thought captured the mostnuance was a chart published by the Jack Phillips ROI Institute. To save over-complication we averaged the costs into a 75% of annual salary turnover cost.

Annual Turnover %: While the US Labor Bureau r eports average turnover costs at 38%, we thought that was a little excessive for our example. In their recent study of workplace psychology,the American Psychology Association estimated turnover at the very best companies to be 11%. We thought that most companies would find the high cost at even a low 11% to be illuminating,so we chose that number.

20%

10%

Average AnnualSalaries

Company with10,000 Employees

$41.3MMin bottom line turnover costs

$150K

$30K

$70K

Annual Loss of Talent(@11% turnover)

770people

people

people

220

110

Cost to Replace(@75% of salary)

$22.5K

$52.5K

EntryLevel

Mid-mgmt

Seniormgmt

70%

$112.5K

$17.3MM

$11.6MM

$12.4MM

Creating this graphic was a real education

for me. So much work went into it that I

thought I would take a few minutes here to

walk you through how we got the calculation

that we did.

HERES THE FINAL PRODUCT:

1

1

2

3

4

5

2

3 4 5

cont inued >


5/15


Then it was all over but the calculating. We

determined that if you had 10K employees@ those given annual salaries, with a

cost to replace at 75% of salary, at an 11%

turnover rate, your annual loss would equal

$X, and in this case $X is a whopping

$41.3 million.

If that number seems impossibly high, and

your company has new recruits beating

down the doors so you spend little on re-cruitment, note that even if everyone in the

company made entry level wages and cost

only $3,500 to replace, the turnover would

still run you $3 million annually. You can

see why I was blown away.

When you do the numbers this way

substituting real metrics for ourestimatesfor your company, even in

the most conservative manner possible, I

think youll be really surprised what talent

loss is costing you, even before you factor

in the intangibles. When you consider

that strategic recognition can boost

those retention numbers dramatically,

its amazing there are any companies out

there without programs. Yet accordingto the latest Mood Tracker survey, 46%

of employees dont feel they are being

recognized effectively.

I think somebody needs to send those

companies our infographic!

We determined that if you had 10K

employees @ those given annual salaries,with a cost to replace at 75% of salary, at an

11% turnover rate, your annual loss wouldequal $X, and in this case $X is a whopping

$41.3 million.


6/15


THE TALENT WAR

CEASEFIRE IS OVER

By Darcy Jacobsen

The economy is recovering. Thats good news, right?

Um right?? Well, yes! But most Human Resources

pros view rising employment data with very mixed

emotion, because as unemployment slowly ticks

down, recruitment can get more competitive, andvoluntary turnover rates begin to inch up. Employees

worry less for their job security, and top talent beginsto poke out of the foxhole and look around

for opportunities.

Employees worry less for their job security,and top talent begins to poke out of the

foxhole and look around for opportunities.

And that is just what we are seeing. In other

words, if the economic recession offered

an armistice in the War for Talent that

ceasefire is rapidly coming to an end.

Of course, employment numbers are

only a small part of the story. The War for

Talent is exactly that: a competition among

employers for the most skilled talent

available. Theres a reason it isnt called

the War for Employees. Thats because

there is a growing shortage of highly-

skilled workers, which is independent of

unemployment among less skilled workers.

According to a 2012 report by the McKinsey

Global Institute, employers will face a 13%

shortage of highly skilled workers by 2020

that is 38-40 million fewer skilled workers

than needed. In developing economies,

the shortage of educated workers could

be nearly 45 million workers. Conversely,

we will see an 11% oversupply of unskilled

workers around the globe. And according to

World at Work, at least 72% of companies

worldwide have already admitted that

finding skilled workers is a major problem.

cont inued >


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This begs the question: This begs thequestion: How can you ensure that you are

able to hire and then retain all the skilled

and qualified workers you need, in the

face of fierce competition? Well, it helps

to consider what skilled employees are

looking for:

Competitive Base Salary

Job Security

Career Advancement & Growth

A Convenient Work Location

Learning & Development

Opportunities

Flexibility

Great Company Culture

Robust Benefits

In light of that, here are some tactics you

might employ in 2013 to differentiate your

company and attract the talent you need.

1. BUILD YOUR HR BRANDYour company may have a great brand, but

do you have a great HR brand? Are people

attracted to your culture and dying to be

part of it? Maintaining an HR brand is more

than simply tacking recruitment ads onto

your corporate brand. It is about projecting

a positive reputation and communicating

that image of your company to current

employees and the prospective employee

pool. People have always been willing to eat

at McDonalds, and employee satisfaction

has always been high. But not many

people wanted to work at a place where

the term McJob was coined. When the

company started to manage its HR brand,

it jumped to #8 on the list of the Best

Multinational Companies to Work For. And

in 2011, when McDonalds sought to hire

62,000 new workers, more than 1 million

people applied. Neglect your HR brand at

your peril.

2. HIRE FOR THE RIGHT FITJust because the market is tough doesnt

mean you should be desperate or lower

your standards. Hiring people who fit

your culture means theyll be both more

productive and more likely to stick around.

3. MAGNETIZE AND

MANAGE YOUR CULTURE

The single best thing you can do to retain

top employees is to create a culture that

they dont want to leave. The top 100 Best

companies to work for see 3% or fewer

of their employees leave voluntarily. Find

ways to create a great culture that reflects

values that your employees can relate to.

Then find ways to measure and manage

that culture.

NEGLECT YOUR HR BRAND

AT YOUR PERIL. cont inued >


8/15


4. THINK OUTSIDE THE

ZIP CODE

Telecommuting and non-traditional work

groups have made the job market a globalone. According to a survey by KPMG, 71%

of companies believe that working across

borders has increased over the past 3 years

and 60% of companies have increased use

of virtual workspaces. Consider broadening

your search for the right candidates to

other geographic regions.

5. TRAIN THE SKILLS

YOU NEED

Hiring for growth potential and developing

existing staff is becoming a tactic for

many companies. This segues nicely

with employees desire for career growth

and empowerment and can be a huge

statement of confidence in your employees

that will boost your culture.

6. INCREASE

SALARIES

It may not always be an option, but

according to Manpowers Talent ShortageSurvey, the pay more approach is

being implemented most often in China

and the U.S. Make sure that at the least,

compensation is at or just above the

averages for your area and industry.

7. MASTER THE

TECHNOLOGY

Being on the cutting edge of technology is

critical to success when the competition

gets cutthroat. Use technology to source

and connect with prospective hires, and

then use it to manage your talent, recognize

and reward employees and measure your

culture. Getting a handle on big data is

necessary for everyone, but mastering it

and making it work for you can give you a

huge competitive advantage.

The Talent War ceasefire is over. So nowthat were back in the trenches, how do you

plan to fight the good fight?


9/15


WHY MANAGERS FAIL TO RECOGNIZE

EMPLOYEE CONTRIBUTIONS

By Leigh Branham, Guest Blogger

One of the most profound drivers of employee retentionis the relationship between employee and manager. Yet,inexplicably, many managers still cannot seem to engagein the behavior that has been proven to keep employeeshappy and on board. Leigh Branham, author of The 7Hidden Reasons Employees Leave, shares some wisdom

on why this might be, and how you can encouragemanagers to help minimize voluntary turnover intheir departments.

After 20 years of researching the drivers of

employee engagement, I have concluded

that the mother lode of motivation come

from what I call the C-A-R Cycle

Giving employees aChallenge Having them Achieve

Making sure they are

promptly Recognized

Yet, sadly, about four out of every five

employee contributions go unrecognized,

according to at least one study. These

management errors of omission are

costly missed opportunities to pump

up engagement levels. So, it seems only

logical to try and understand why so many

managers fail to recognize. After reading

more than 100,000 verbatim comments

from surveys submitted in Best-Places-

to-Work competitions, Ive identified 13

reasons managers fall short when it comes

to recognizing their peopleeach of which

is understandable, but unacceptable:

They believe they are too busy to

take the time. This is usually a failure of

the culture that has either overloaded their

managers as doers rather than delegators

or, has somehow communicated to

managers that recognizing employees is

not an essential part of their job.

They actually have the time, but

are not paying enough attention to the

employees performance to notice the

contribution. Many managers are simply

more task-focused than people-focused,

and have their heads down looking at

their to-do lists.cont inued >

C h C f ld l


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They believe if you dont hear from

me, it means youre doing a good job. Ivepersonally heard this one from more than

one manager.Its an abdication of manager

responsibility in the guise of giving the

employee autonomy. And managers

should bear in mind what the renowned

psychologist William James once said:

The deepest principal in human nature is

the craving to be appreciated.

They believe employees shouldnt

expect me to pat them on the back

all the time for just doing their jobs

their paycheck should be enough.

This perspective is quite common and

reveals a basic misunderstanding of

human psychology. On the contrary, the

pats on the back should be reserved for

acknowledging extra effort, not for just

doing their jobs.

They are unsure about how best to

recognize, so they do nothing. This is easyenough to understand; people tend not to

do things when theyre not exactly sure on

how to do them. But this one is also the

easiest to correctby training managers

in the basic principles and how-tos of

effective recognition.

They never received much praise

or recognition themselves, so they

arent inclined to give it to others. Again,

understandable but not excusable. In fact,

many managers who practice recognition

most effectively do so because they know

what its like not to be recognized.

They believe employees will think

they are phony and insincere if they

suddenly start praising them. Its OK for a

manager to tell their direct reports theyve

decided to start doling out praise when its

merited. The key is to notice and praise a

specific above-and-beyond contribution

and describe how much it meant to the

business, not just go around patting

people on the back and saying youre

doing a great job.

They are concerned that if they give

special recognition to some, others willfeel unfairly overlooked.Employees usually

know who deserves to be recognized and

who doesnt. The mistake some managers

make is praising the team as a whole when

it was really one individual that carried the

ball, or singling out one person when it

was a team accomplishment.

They harbor a fundamental

disrespect for some types of work or

workers. I once heard a manager say

A monkey could do that job. Ive also

noticed a tendency to devalue employees

in support departments in companies that

are otherwise sales-or expertise-driven.

This is clearly a massive mistake; all jobs

and contributions are worthy of respect.

cont inued >

A C h C f B ildi E l R i 11


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They believe employees know theyre

replaceable and shouldnt expect to receivespecial treatment. This one is endemic to

the current economy. Too many leaders are

counting on a poor job market to motivate

employee loyalty. Are we really motivated

by You should feel lucky to have a job?

They dont believe they should

have to pay employees above market for

sustained high performance or provide

bonuses for special achievements.The fact

is only about a third of employees believe

their pay is linked to their performance.

The best employers pay a premium for

high performance.

They believe the employees they

recognize will respond by asking for a raise.

Some employees will indeed ask for raises,

but that is a question that every manager

should expect and be prepared to discuss.

They dont know enough about the

employees jobs to distinguish betweenaverage and superior performance.

Ive heard this one many times from

employees in describing their managers,

often in technical organizations. Managers

who cant make distinctions between

average and superior performance

among their direct reports should not be

managing them.

There you have ita bakers dozen

reasons. Having presented and discussed

these at length with hundreds of

managers, I realize that many will remain

firm in their resistance to giving too much

recognition to employees whom they see

as already too entitled, or part of the

trophy generation who got trophies for

just participating and expect more of the

same at work. Yet, when I ask audiences

of all ages How many of you get too much

recognition?, not a hand goes upever.

I do not advocate giving more recognition

than people deserve. Those whoseexpectation of recognition exceeds the

value they bring should receive the strong

dose of reality they needin the form of

direct, fact-based feedback.

Questions to consider: Which of the

above reasons, if any, do you believe

are justifiable? Which do you believe

present the biggest obstacles to employee

engagement? What should companies

do to address the beliefs inherent in

these reasons?

Leigh Branham is Founder and Principal

of Keeping the People, Inc., which helps

companies analyze the root causes of

employee disengagement and turnover, then

develop strategies for becoming better places

to work. He is the author of The 7 Hidden

Reasons Employees Leave and Re-Engage:

How Americas Best Places to Work Inspire

Extra Effort in Extraordinary Times.

When I ask audiences of all ages Howmany of you get too much recognition?,

not a hand goes upever.

A C h C f B ildi E l R t ti 12


12/15


12 SUREFIRE TIPS TO REDUCE

EMPLOYEE TURNOVER

By Darcy Jacobsen

How would you feel about a higher retention rate

in your organization? I dont know about you, but I

cant think of a single HR exec I know who would turn

that down. In fact, employee retention is without a

doubt one of the most intense challenges facing mosthuman resources departments.

Sadly, with the improving economy and

the coming talent crunches due to retiring

boomers, retention rates promise only to

get worse. Already, turnover rates for all

industries hover around 13%and those

rates are far higher in the service sector,

where the average is 30%, according

to SHRM. The retention crisis will

undoubtedly intensify as the talent war

rages and Millennials (who are notorious

for job hopping) become a bigger part of

the workforce.

With that in mind, here are a dozen tips on

how you can slow down the revolving door

at your company. Some may be familiar,

some may be new to you, but all should

help you inspire long-term loyalty from

your best employees.

1. HIRE THE RIGHT PEOPLE

The best way to ensure employees dont

leave you is to make sure you are hiring the

right employees to begin with. Define the

role clearlyboth to yourself and to the

candidates. And then be absolutely sure

the candidate is a fit not only for it, but for

your company culture.

2. FIRE PEOPLE WHODONT FIT

As the old saying goes, a stitch in time,

saves nine. The same goes for cutting

employees loose when necessary.

Sometimes even when you follow the

advice above, you get an employee who

no matter what you try to dojust doesnt

fit. And, no matter how effective they might

be at their actual work, an employee who is

a bad fit is bad for your culture, and that

creates culture debt. They will do more

damage than good by poisoning the well of

your company. Cut them loose.

cont inued >



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3. KEEP COMPENSATION

AND BENEFITS CURRENT

Be sure that you are paying employees the

fair going wage for their work (or better)

and offer them competitive benefits, or

reallywho can blame them for ditching

you? This might seem like a no brainer but

youd be surprised how few companies

offer raises that keep up with an employees

development and actual rising worth.

4. ENCOURAGE

GENEROSITY AND

GRATITUDE

Encourage pro-social behavior in your

employees. When they are given the

opportunity to connect with one another

through acts of generosity and the

expression of gratitude, employees will

be healthier, happier, and less likely tofly the coop. And by encouraging them

to be on the lookout for good behaviors

to commend, you give people a sense of

ownership of the company.

5. RECOGNIZE AND

REWARD EMPLOYEES

Show your employees they are valued and

appreciated by offering them real-time

recognition that celebrates their successes

and their efforts. Make it specific, social

and supported by tangible reward, and you,

too, will be rewardedwith their loyalty.

6. OFFER

FLEXIBILITY

Todays employees crave a flexible life/work

balance. That impacts retention directly. In

fact, a Boston College Center for Work &

Family study found that 76% of managers

and 80% of employees indicated that

flexible work arrangements had positive

effects on retention. And more and more

companies know it. That means, if youre

not offering employees flexibility aroundwork hours and locations, they might easily

leave you for someone who will.

7. PAY ATTENTION TO

ENGAGEMENT

This one sounds obvious, but for too many

leaders interest in engagement is limited

to the results of engagement surveys. Its

not enough simply to run an engagement

survey once a year. You need save most of

your energy to take action based on the

results and you need to work to build a

culture of engagement in your company all

year long.

8. PRIORITIZE EMPLOYEE

HAPPINESS

Happiness may sound a bit soft and

squishy to many execs, but the numbers

behind it are anything but. Employee

happiness is a key indicator of job

satisfaction, absenteeism and alignment

with valuesjust for starters. Investing inthe happiness of your employees will pay

dividends in engagement, productivity and

yes, retention.

cont inued >



14/15


9. MAKE OPPORTUNITIES

FOR DEVELOPMENT

AND GROWTH

Employees place HUGE value on

opportunities for growth. In fact, arecent Cornerstone survey drew a direct

connection between lack of development

opportunity and high turnover intentions.

If you arent developing your employees

then you arent investing in them. And if

you arent investing in them, why should

they stay with you?

10. CLEAN UPPERFORMANCE

REVIEWS

Our most recent Workforce Mood Tracker

survey painted a frankly dismal picture of

how employees feel about performance

reviews. Only 49 percent of them find

reviews to be accurate, and only 47 percent

find them to be motivating. Performance

reviews offer a prime opportunity for abig win to increase trust and fortify your

relationship with employees. Improve

performance management by overhauling

reviews, and watch employee trust and

satisfaction grow.

11. PROVIDE AN

INCLUSIVE VISION

One key factor in employee engagement

and happiness, according to experts, is to

provide them with a sense of purpose andmeaning in their work. Offer employees

a strong vision and goals for their work

and increase their sense of belonging and

loyalty to your organization.

12. DEMONSTRATE AND

CULTIVATE RESPECT

Finally, dont discount respect when it

comes to creating a magnetic culture.

In fact, in one 2012 study, respect in the

workplace was revealed to be a key factor

in voluntary turnover. Find ways to cultivate

and nurture respect in your workplace and

it will pay off in higher retention.

Use these tips to help build a culture in your

organization that will keep your turnover

rates low, and your best employees onboard and productive for years to come.



15/15


Keep Your Talent from Walking OutCombat Rising Quit Rates by Holding onto the

Employees You Value Most

2013 Globoforce Limited. All rights reserved.

Interested in more strategies for reducing

turnover in your organization?

Call us at 1-888-7GForce to learn more aboutthe amazing impact strategic recognition canhave on retention.

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